Sunday, August 11, 2013

Why We Need a Bigger Social Security System with Higher, Not Lower Benefits:
Edward Filene's idea from the 1920s of having companies run
employer-sponsored defined-benefit plans has, by and large, come a-crashing
down. Companies turn out not to be long-lived enough to run pensions with a
high enough probability. And when they are there is always the possibility
of a Mitt Romney coming in and making his fortune by figuring out how to
expropriate the pension via legal and financial process. Since pension
recipients are stakeholders without either legal control rights or economic
holdup powers, their stake will always be prey to the princes of Wall
Street.

That suggests that what we really need is a bigger Social Security
system--unless, of course, we can provide incentives and vehicles for people
to do their retirement saving on their own. But 401(k)s have turned out to
be as big a long-run disaster as employer-sponsored defined-benefit pensions
when one assesses their efficiency as pension vehicles.

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We Need a Bigger Social Security System

One more from Brad DeLong:

Why We Need a Bigger Social Security System with Higher, Not Lower Benefits:
Edward Filene's idea from the 1920s of having companies run
employer-sponsored defined-benefit plans has, by and large, come a-crashing
down. Companies turn out not to be long-lived enough to run pensions with a
high enough probability. And when they are there is always the possibility
of a Mitt Romney coming in and making his fortune by figuring out how to
expropriate the pension via legal and financial process. Since pension
recipients are stakeholders without either legal control rights or economic
holdup powers, their stake will always be prey to the princes of Wall
Street.

That suggests that what we really need is a bigger Social Security
system--unless, of course, we can provide incentives and vehicles for people
to do their retirement saving on their own. But 401(k)s have turned out to
be as big a long-run disaster as employer-sponsored defined-benefit pensions
when one assesses their efficiency as pension vehicles.